SEATTLE--(BUSINESS WIRE)--Russell Investments released its 2016
Global Market Outlook – Q2 Update, offering the latest economic
insights and market forecasts from its global team of investment
strategists, which help guide the firm’s multi-asset portfolios and
services.

The firm’s strategists expect business cycle support for global equities
to weaken and government bond prices to remain rich in 2016, as the
difference between hawkish (U.S.) and dovish (Europe, Japan) monetary
policies drives market volatility. Regarding China, the team believes
the economic downturn still appears to be heading for a “soft landing,”
but if there is a time when skeptics will be proven correct, this is the
year.

“Our investment strategy process is moving away from 'buy-the-dips'
toward 'sell-the-rallies,' though we still see low single-digit returns
globally for 2016," said Andrew Pease, Russell Investments’
global head of investment strategy. "With downside risks for equity
markets outweighing potential upside scenarios, we expect to maintain a
cautious outlook until business conditions improve.”

In the U.S., the strategists believe two Federal Reserve rate hikes
during 2016 are likely to help push the 10-year U.S. Treasury yield to
the 2.3% range over the next 12 months. As for U.S. equities, they now
have a higher probability of holding to low single-digit returns for
2016, versus a projection of low-to-mid single digits at the beginning
of the year, as a result of expensive valuations and waning price
momentum. The good news is that even with gross domestic product (GDP)
and corporate profits weakening, the likelihood for a near-term U.S.
recession remains low.

“We have an underweight preference for U.S. equities in global
portfolios as lackluster earnings and rich valuations suppress
total-return expectations to near-zero over the next 12 months,” said Paul
Eitelman, investment strategist, North America. “While we do see
more prevalent downside risks for the U.S. following the first quarter
of 2016, the lack of major imbalances in the U.S. economy makes a
recession this year unlikely.”

In contrast to the U.S., eurozone equities are being helped by
quantitative easing (QE) and offer some reasonable valuations that are
preferred by the team of strategists. However, further QE announcements
are not having a big impact on either the euro or the Japanese yen. As a
result, the team believes the U.S. dollar (USD) bull run is expected to
run out of steam this year.

Russell Investments’ global team of investment strategists determines
its global outlook through a clearly defined process that is based on
the building blocks of business cycle, valuation and sentiment. Their
current global market perspectives are as follows:

Valuation: The early first quarter 2016 pullback in equity
markets has improved value across developed markets. The U.S. is still
rated as the most expensive, as of March 30, 2016, while Japanese and
European equities are slightly cheaper and emerging market equities
are moderately cheap.

Business Cycle: The cycle is becoming less supportive for
equities. The strategists believe Europe and Japan still have the most
favorable cycle backdrop due to supportive monetary policy, weak
exchange rates and the potential for rising profit margins. The cycle
is now neutral for U.S. equities given the risks around
earnings-per-share (EPS) growth and the potential for further Fed
tightening. The cycle is negative for emerging markets amid slowing
growth, export weakness and a deteriorating outlook for EPS growth.

Sentiment: Price momentum is negative in every region, which is
a negative sentiment indicator. Contrarian indicators, however, still
point to modestly oversold conditions, providing a counterbalance to
negative price momentum. Overall, sentiment is neutral across the
major regions.

Updated regional exposure forecasts

The strategists also updated their forecasts across global regions and
asset classes for 2016, as of March 30, 2016, including:

Asia-Pacific: The team expects low absolute returns and high
volatility from regional equities. Bonds in the region are at extremes
of expensive valuation, while the business cycle is a mixed bag.

United States: The team has an underweight preference for U.S.
equities in global portfolios and expects total returns near zero over
the next 12 months.

Eurozone: Russell Investments maintains an overweight
preference for eurozone equities and has returned to an overweight
position for peripheral bonds. Slowing global growth and global
earnings expectations pose worries, but the team believes strong
eurozone fundamentals carry the day, for now.

Currency: The team foresees a plateauing USD exchange rate. The
yen’s attractive valuation and defensive characteristics make it the
strategists’ top currency pick.The team also believes a
significant selloff in developing country currencies would be a buying
opportunity.

Fixed Income: The outlook for government bonds remains poor
with negative 10-year Treasury yields in Japan and close to record
lows in the U.S. and Europe; however, the outlook is less negative as
a result of the weakening business cycle.

Russell Investments, a global asset manager, is one of only a few firms
that offers actively managed multi-asset portfolios and services which
include advice, investments and implementation. Russell Investments
stands with institutional investors, financial advisors and individuals
working with their advisors—using the firm’s core capabilities that
extend across capital market insights, manager research, asset
allocation, portfolio implementation and factor exposures to help each
achieve their desired investment outcomes.

Russell Investments has more than $241 billion in assets under
management (as of 12/31/2015) and works with more than 2,500
institutional clients, independent distribution partners and individual
investors globally. As a consultant to some of the largest pools of
capital in the world, Russell Investments has $2.2 trillion in assets
under advisement (as of 6/30/2015). The firm has four decades of
experience researching and selecting investment managers and meets
annually with more than 2,200 managers around the world. Russell
Investments also traded more than $1.7 trillion in 2014 through its
implementation services business.

Headquartered in Seattle, Washington, Russell Investments is wholly
owned by London Stock Exchange Group (LSEG) and operates globally,
including through its offices in Seattle, New York, London, Paris,
Amsterdam, Milan, Dubai, Sydney, Melbourne, Auckland, Seoul, Tokyo,
Shanghai, Beijing, Toronto, Chicago and Milwaukee. For more information
about how Russell Investments helps to improve financial security for
people, visit www.russellinvestments.com
or follow @Russell_Invest.

These views are subject to change at any time based upon market or other
conditions and are current as of the date at the top of the page. The
information, analysis, and opinions expressed herein are for general
information only and are not intended to provide specific advice or
recommendations for any individual or entity.

Investing involves risk and principal loss is possible.

Forecasting is inherently uncertain and may be incorrect. It is not
representative of a projection of the stock market, or of any specific
investment.

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be exposed to a variety of risks based on the asset classes, investment
styles, market sectors, and size of companies preferred by the
investment managers. Investors should consider how the combined risks
impact their total investment portfolio and understand that different
risks can lead to varying financial consequences, including loss of
principal.

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